Chapter 13 Defined

• Chapter 13 is a partial debt repayment plan. It restructures "nonpriority" debts such as credit cards, medical bills and unsecured bills, and allows debtors to partially repay such bills over a three- to five-year time period. During a Chapter 13 repayment plan, the debtor cannot get any new credit without court permission.
  
  

Eligibility Basics

• You must have some disposable income in order to file Chapter 13; otherwise you must liquidate your nonpriority debts under Chapter 7. If you owe more than $1,081,400 in secured debts such as mortgages and car loans or more than $360,475 in unsecured debts such as credit cards, you cannot file Chapter 13 bankruptcy.
  
  

"Priority" Debts

• "Priority" debts are ineligible for any type of bankruptcy relief, including reduction under Chapter 13. Such debts include child support, alimony and court fines. Debtors can include tax bills in their Chapter 13 plans only if the debts were incurred at least three years prior to filing bankruptcy. While private student loans are eligible for Chapter 13, federally issued student loans are rarely eligible for bankruptcy assistance. A judge may approve an exception for seriously disabled people or those whose colleges closed or otherwise acted irresponsibly.
  
  

Tax Refunds and Assets

• During your Chapter 13 plan, you will likely use part or all of your tax refunds toward creditor repayment. Bankruptcy court officials can demand you turn over excessive assets such as stocks to offset your creditors' financial losses. But your retirement accounts are entirely safe, and in many cases you can keep your house even if you filed Chapter 13.
  
  

Additional Considerations

• As of 2011, it costs $274 to file Chapter 13, according to the United States Bankruptcy Court. You also must complete a pre-bankruptcy credit counseling session and another session before you finish your Chapter 13 plan. You need not hire an attorney to file Chapter 13, but some people prefer to do so. Whether or not you hire an attorney, you must attend a "341 meeting" during which your creditors can make demands regarding your repayment plan. Also, if you did not file your last four owed tax returns, you cannot legally request Chapter 13 until you do so.